Jones agreed to sign a three and a half year contract, subject to a medical, to work alongside Ray Harford, himself a former Wimbledon manager, in revitalising the First Division side.
Jones admitted that it was "a huge wrench" to leave Wimbledon, the club he gave up his job as a hod-carrier to join in 1986, with whom he won the FA Cup in 1988 and the team he rejoined in 1992 after a three-year break with Leeds, Sheffield United and Chelsea.
Jones was the founder member of the Crazy Gang spirit that marked Wimbledon apart and enabled them to become as successful as many of their bigger rivals on meagre resources.
He said: "It's a bit sad. That's it now, the old Crazy Gang won't be there any more. But there are certainly boys at Wimbledon now who can take it on a step further. They've got their own little Crazy Gang there themselves and they'll go on to good things.
"But you can't live in the past. You have to go forward and I have to be looking to coach and then to go into management."
Jones, never the model professional having been sent off 12 times in his career and once booked just three seconds into a game, said he was so excited about the move that his "heart was pounding out of his chest".
Tommy Burns, the former Celtic manager, is back in management with the struggling First Division side Reading.
Burns, who was youth development officer at Newcastle, has taken over from the caretaker-manager Alan Pardew. The former manager Terry Bullivant resigned last week following protests from fans.
Burns was first offered the Reading job nine months ago when the then joint managers, Jimmy Quinn and Mick Gooding, left the club. He accepted verbally, but was then tempted away following a last-minute bid from Newcastle.
"I think I can save Reading from relegation, even though we have a tough run in our last seven games," Burns said. "I will definitely be strengthening the squad before tomorrow's deadline.
"I went to Newcastle instead of Reading because they were a big club and I thought I would find opportunities there. As time went by, I began to realise that there were no opportunities and I wanted to be my own man and get into management."
Arsenal's Remi Garde has announced that he will retire at the end of the season. Garde has never really made an impact at Highbury since his move from Strasbourg in the summer of 1996 and said he was returning to live in Lyon, where he will work towards his coaching qualifications.
Wolves are setting themselves up for the FA Cup semi-final against Arsenal by signing the Australian international winger Robbie Slater from Southampton for pounds 50,000.
The First Division side also re-signed midfielder Neil Emblen yesterday, after selling him to Crystal Palace for pounds 1.8m earlier this season. Wolves' young striker Jason Roberts has joined Bristol City on-loan.
Newcastle have gone to their neighbours Darlington to sign two young players in a deal which could eventually be worth pounds 1.8m to the Third Division side. They have paid an initial fee of pounds 500,000 for strikers Paul Robinson, 19, and James Coppinger, 17.
Sunderland have made the former Southampton and Fulham manager Ian Branfoot director of their football academy.